Discounting Danger

07.12.2016

By Joan E. Collier

On June 30, the U.S. Department of Labor made a rather big production in announcing that fines would be going up in several departments when companies were found in violation of safety laws and regulations. The departments involved include the Mine Safety and Health Administration, the Occupational Safety and Health Administration, and the Office of Workers’ Compensation Programs.

(Everyone is familiar with OSHA. The MSHA oversees mining operations throughout the country, and the OWCP administers the Division of Federal Employees' Compensation, the Division of Energy Employees Occupational Illness Compensation, the Division of Longshore and Harbor Workers' Compensation, and the Division of Coal Mine Workers' Compensation.)

The department’s release said, in part, “In 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act to advance the effectiveness of civil monetary penalties and to maintain their deterrent effect. The new law directs agencies to adjust their penalties for inflation each year using a much more straightforward method than previously available, and requires agencies to publish “catch up” rules this summer to make up for lost time since the last adjustments.

“OSHA’s maximum penalties, which have not been raised since 1990, will increase by 78 percent. The top penalty for serious violations will rise from $7,000 to $12,471. The maximum penalty for willful or repeated violations will increase from $70,000 to $124,709.”

It further noted that OWCP’s penalty for failure to report termination of payments made under the Longshore and Harbor Workers’ Compensation Act, which has only increased $10 since 1927, will rise from $110 to $275.

So, sounds like a big deal, with potentially large hits to scofflaws. And perhaps it would be, if that were the end of the story.

However, as the Center for Progressive Reform (CPR), reveals in its “OSHA's Discount on Danger: OSHA Should Revise Its Informal Settlement Policies to Maximize the Deterrent Value of Citations,” there are the broadcasted fines, then there are the negotiations, then there are the discounted actual fines.  

OSHA routinely agrees to reduced fines in exchange for a promise to fix the hazard “promptly,” or other considerations.

During the Obama administration, CPR reports, “OSHA closed cases at a median of 25 percent below its initial fines in cases involving worker fatalities. In the face of tragedy, OSHA's pursuit of the quick fix resulted in median penalties of only $5,800, less than the cost of an average funeral.”

Based on an employer’s size, history of violations, and good faith, penalties can be reduced by as much as 80 percent. One example: in 2014, OSHA responded to a complaint about working conditions at Koser Iron Works, Inc., a steel fabrication company located in Barron, Wis. The inspection uncovered two willful, four repeat, 12 serious, and two other-than-serious safety violations. The proposed $102,180 fine ultimately was reduced by $30,654.
 
I realize that everything is negotiable, from car prices (where were these great negotiators when I bought my new car!) to prison terms. However, if the purpose of penalties is to punish bad behavior and to deter future bad acts, then the penalties have to be consequential. “Discounting danger” puts us all at risk.

(Read more Work Comp Nation blogs here.)

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